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This is a discussion on Tifia Daily Market Analytics within the Analytics and News forums, part of the Trading Forum category; GBP/USD: negative dynamics prevails
22/05/2018
Current dynamics
As the head of the Bank of England, Mark Carney, stated today, "the ...

Current dynamics
As the head of the Bank of England, Mark Carney, stated today, "the signs of the restoration of momentum can be manifested in the next few months". "If the momentum recovers, then, according to our guidelines, certain actions will follow logically", added Carney. In the meantime, Mark Carney suggests waiting for "recovery of momentum before raising the stakes".
Another representative of the Bank of England Vlige spoke in the same vein, saying that "we can wait for a few more months without special expenses before raising rates".
As you know, earlier in the month the Bank of England retained the key interest rate at 0.50%. In the face of continuing uncertainties regarding Brexit, as well as against the backdrop of the absence of "signs of recovery of momentum", the Bank of England preferred not to change the current conditions of monetary policy. Although the collapse of the British economy after the referendum on Brexit in the summer of 2016 did not happen, the collapse of the pound and the subsequent rapid growth of inflation significantly worsened the level of welfare of the British. The fall in the level of retail sales and domestic demand had a negative impact on the UK economy, focused primarily on the domestic market.
The tightening of the monetary policy of the central bank would have a stimulating effect on the growth of consumer spending, especially with regard to imported goods.
However, the increase in the interest rate makes higher interest rates on loans for commercial banks and for the population, including mortgage loans. A higher exchange rate of the national currency also reduces the competitiveness of export products abroad, which negatively affects the country's exporters. The deficit of the UK trade balance exceeds 3 billion pounds and has a tendency to increase. The Bank of England also lowered its forecast for GDP for 2018 from 1.75% to 1.40%.
On Wednesday (08:30 GMT) data on consumer inflation in the UK will be published. As expected, the consumer price index (CPI) will indicate that the growth rate of annual inflation in April did not change (2.5% against 2.5% in March).
If the data does indicate an acceleration of inflation, the Bank of England will be forced to tighten monetary policy. Some economists expect that the Bank of England can still go on raising rates in August or November, which will cause the strengthening of the pound.
Meanwhile, representatives of the Federal Reserve regularly give signals about the commitment of the US central bank to a plan to further tighten monetary policy.
So, on Tuesday, a member of the Committee on open market operations, the FRS Patrick Harker said that he will support three more increases in the key rate this year. It is characteristic that even last month Harker was among those who spoke of "two more rises".
According to another member of the FOMC, Loretta Mester, "it is advisable to continue tightening monetary policy to avoid increasing risks to macroeconomic stability".
Thus, the Bank of England's predilection for a softer monetary policy amid the Federal Reserve's intention to gradually raise the interest rate makes the pound vulnerable to the dollar and leads to a further decline in the GBP / USD.*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics

Current dynamics
According to the National Bureau of Statistics (ONS) on Wednesday, consumer prices in the UK in April rose by 2.4% (in annual terms) after growing 2.5% in March. The forecast assumed an increase of + 2.5%. The rate of price growth in April was the weakest since March 2017. On the one hand, this is good for British consumers; on the other hand, a weakening of inflationary pressures postpones a probable increase in the interest rate in the UK to a later date.
At its previous meeting, the bank's management left rates at the same level, as official statistics pointed to the weakness of economic growth in the first quarter of 2018. The Bank of England also lowered its forecast for GDP for 2018 from 1.75% to 1.40%. At the same time, the deficit of the UK trade balance exceeds 3 billion pounds sterling and has a tendency to increase.
As the head of the Bank of England, Mark Carney, said on Tuesday, we should wait "restoring of momentum before raising the stakes".
Political events are also putting pressure on the pound. Conservative politician Jacob
Rice-Mogg, who actively supported Brexit, accused the British government of weakness. Statements by a government spokesman suggest a renewed risk of a change in the composition of the country's leadership. The pound is unlikely to grow until this uncertainty is resolved with Brexit and the composition of the UK government.
At the same time, the Fed leaders continue to give signals for the continuation of the Fed's policy, aimed at further tightening of monetary policy.
According to FOMC member Loretta Mester, "it is advisable to continue to tighten monetary and credit policies to avoid increasing risks for macroeconomic stability".
Today, the focus of traders' attention will be the publication (at 18:00 GMT) of the protocol from the May meeting of the Fed. If it turns out that the Fed assesses the economy less optimistically than the market expects, then it can deploy the dollar, or at least suspend its strengthening.
At the December meeting, the leaders of the Federal Reserve planned 3 rate increases in 2018. However, investors expect that on the background of positive macro statistics and a strong labor market in the US, the Fed can make 4 rate increases this year.
This will significantly increase the investment attractiveness of the dollar among investors looking for a stable profit.
If the Fed's protocols contain signals about the possibility of 4 rate increases this year, then the strengthening of the dollar will continue.
The different focus of the monetary policy of the central banks of the United Kingdom and the United States will further reduce the GBP / USD.*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics

Current dynamics
According to the National Bureau of Statistics (ONS) report released on Thursday, retail sales in UK rose 1.6% in March after falling by -1.1% in March. The data presented became a pleasant surprise for the pound buyers after in the 1st quarter of this year compared to the last quarter of 2017, sales decreased by 0.5%.
The increase in retail sales may indicate the restoration of consumer confidence, as well as the acceleration of inflation, which may prompt the Bank of England to tighten its monetary policy. Nevertheless, the data released on Wednesday on consumer price inflation for April showed the weakest growth in more than a year.
In a broader perspective, "the growth in retail sales has slowed significantly, and the growth in sales of food, household items and sales in online stores has largely been offset by a decline in sales of many other goods and services", said National Bureau of Statistics spokesman Rob Kent-Smith. At the same time, it is likely that the salaries of the British will grow only gradually. In this case, the retail sector is likely to remain under pressure.
The UK economy is focused mainly on the domestic market, while the retail and domestic consumption sector is an important part of the British economy.
It is expected that in 2018 the UK economy will grow more slowly than other developed economies, as the uncertainty of the Brexit conditions puts pressure on activity and investment.
On Tuesday, the Governor of the Bank of England and members of the Committee on Monetary Policy said in Parliament that the bank could raise interest rates "in a few months". However, we should wait for "recovery of momentum before raising rates".
At the same time, as follows from the minutes of the May meeting of the Fed, published on Wednesday, the leaders of the US central bank came to the conclusion that "the next increase in interest rates will be expedient in the near future". However, there is no consensus on 3 or 4 rate increases this year among the leaders of the Fed.
Nevertheless, the leaders of the Fed intend to systematically pursue the planned monetary policy aimed at its further tightening.
With an increasing interest rate, the attractiveness of the dollar will grow. According to some leaders of the Fed, "it is advisable to continue to tighten monetary and credit policy in order to avoid increasing risks for macroeconomic stability".
Thus, the different focus of the monetary policy of central banks in the UK and the US, as well as the uncertainty about Brexit, will further reduce the GBP / USD pair.
From the news for today we are waiting for the speech at 17:00 (GMT) of the head of the Bank of England Mark Carney. If he touches on the topic of monetary policy in his speech, then volatility in pound trade can grow dramatically.*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics

WTI: oil quotes are down
25/05/2018
Current dynamics
After the Energy Information Administration (EIA) of the US Energy Ministry reported on Wednesday about the growth of oil reserves in the US last week by 5.8 million barrels (although analysts had expected a decrease of 2.2 million barrels), quotes of oil prices crawled down.
Oil prices are also under pressure due to reports that OPEC at the June meeting may decide to increase oil production amid fears of a reduction in production in Iran and Venezuela.
On Thursday, Russian Energy Minister Alexander Novak said that Russia and other major oil producers at the OPEC+ meeting next month will discuss mitigation of the terms of the agreement on production reduction. The Russian minister noted that he will discuss with Saudi Arabia and other OPEC members the possibility of a "gradual recovery of oil production".
Thus, the direction of the oil price dynamics is currently in the grip between the growth of oil reserves in the US and the intention of OPEC to increase oil production, on the one hand, and geopolitical risks, on the other hand.
Among geopolitical risks - the resumption of US sanctions against Iran and the aggravation of the crisis in Venezuela, which led to a reduction in oil production in the country. Trump's decision to withdraw from the "nuclear deal" with Iran is still a strong driver for rising oil prices. Because of possible US sanctions against Iran, the supply of oil in the world market may decrease by about 1 million barrels per day of Iranian oil.
As we see, the risks associated with the possible increase in oil production by OPEC so far outweigh, and oil prices are declining.
On Friday (at 17:00 GMT) a weekly report from the American oil service company Baker Hughes on the number of active oil drilling rigs in the US will be published. Their number almost weekly grows and at the moment is 844 units. Another growth of this indicator will be another negative factor for the oil market and for oil prices.*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics

Current dynamics
On Wednesday, May 30, the Bank of Canada will be deciding on the interest rate. After the Bank of Canada left the rate at the previous level of 1.25% in April, the Canadian dollar declined. The central bank is concerned about international trade conflicts and weaker economic expectations than expected.
Uncertainty over the NAFTA negotiations puts pressure on Canadian investment and exports, said earlier this month, Bank of Canada Deputy Governor Lawrence Schembri, noting that "we (at the Bank of Canada) have to hedge themselves because of the uncertainty surrounding NAFTA negotiations".
The USD / CAD is currently in the grip between two differently directed factors. The strengthening US dollar and the uncertainty associated with the prolongation or amendment of the terms of the NAFTA agreement support the USD / CAD pair. At the same time, rising oil prices help strengthen the Canadian dollar and reduce the pair USD / CAD.
However, the last few days, oil prices are falling due to reports that OPEC may decide at its June meeting to increase oil production amid fears of a reduction in production in Iran and Venezuela.
So, Saudi Arabia's oil minister Khaled Al-Falih said on Friday he wants to discuss the possibility of easing the requirements for limiting production with other participants in the OPEC + agreement during the meeting in June.
"Despite the higher demand in the world economy, the growth of investment (Canadian) companies focused on exports will be limited by the increased uncertainty surrounding foreign trade and concerns about regulatory rules. In addition, after the tax reform in the United States, the question of likely investors switching to US assets", said in the Bank of Canada in the accompanying statement after the decision on the interest rate at the previous meeting in April.
Economists expect that at the May meeting (May 30), the Bank of Canada will also not change the current monetary policy. The rate will remain at the current level of 1.25%.
Nevertheless, investors will carefully study the text of the accompanying statement of the Bank of Canada in order to understand the intentions of the central bank regarding the prospects for the monetary policy of the bank. Any hints of a rate hike in the coming months could cause a surge in volatility in the foreign exchange market, primarily in currency pairs with the Canadian dollar, including in the pair USD / CAD.
If the rhetoric of the Bank of Canada's statement is soft, it will cause further weakening of the Canadian dollar. However, with the resumption of rising oil prices, it is also necessary to wait for the resumption of the strengthening of the Canadian dollar.*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics

XAU/USD: demand for gold as a safe haven grew
29/05/2018
Current dynamics
On Sunday, Italian President Sergio Mattarella blocked the formation of a Eurosceptic government. On Monday, representatives of European countries expressed concern about the unstable political situation in Italy, which could provoke a new centrifugal crisis in the Eurozone.
The situation with Brexit is not yet fully settled, and in Spain a new political crisis is maturing after the referendum in Catalonia, the political crisis in Italy again made us speak about the future of a united Europe.
On Wednesday in Paris, high-ranking representatives of the EU and the US will hold talks on trade issues. Negotiations will take place in the context of deepening contradictions between Europe and the US on trade and defense issues. The European Commission was told that they will seek to abolish duties on imports of steel and aluminum in the US from Europe and exclude the EU from the duty regime two days before the end of the deferment of their introduction.
Investors as a whole avoid risks, in connection with which the prices for government bonds of the US and Germany are growing. The yield of 10-year US government bonds fell to 2.8% on Tuesday from the level of 3,122%, fixed in the middle of last week. The yield of similar German bonds fell to 0.214% from yesterday's 0.340%.
The unstable geopolitical situation in the world once again provoked an increase in demand for safe haven assets, such as yen and gold. Quotes of gold on Tuesday increased again.
Nevertheless, the current growth in the price of gold in the face of a strengthening dollar can be considered corrective and used to build short positions on gold.
As you know, at the meeting that ended in early May, the Fed confirmed its intention to adhere to its plan to gradually tighten monetary policy. "Too slow increase of rates will lead to the fact that at some point it will be necessary to sharply tighten monetary and credit policy, putting GDP growth at risk", Fed Chairman Jerome Powell said last month.
On June 12-13, the Fed will hold a regular meeting, and most market participants believe that at this meeting the interest rate will be increased by 0.25% to 2.00%.
According to the Fed interest rate futures quotes, investors estimate the probability of a rate hike in June at about 100%, and the likelihood of another three rate increases this year is approximately 50% (compared to 32% a month earlier).
As you know, in the context of an increase in the interest rate, the price of gold is falling, because it is more difficult for him to compete with other objects for long-term investments that generate revenue, such as, for example, government bonds. At the same time, the investment attractiveness of the dollar is growing.
The focus of traders this week will be the publication (on Friday 12:30 (GMT)) of data from the US labor market. Strong figures are expected (the number of new jobs in the non-agricultural sector of the US economy increased by 185,000 in May against +164,000 in April, unemployment remained at the same low level of 3.9%, the lowest level in the last 18 months). If the data prove to be better, the dollar will receive another strong support against the backdrop of positive macro statistics coming in recently from the US, and gold will continue to fall in price.
Only weak macro data from the United States, as well as an even greater strengthening of geopolitical tensions in the world, can push gold quotes higher. So far, negative dynamics prevails.*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics

USD/CAD: The Bank of Canada will decide on the interest rate
30/05/2018

Current dynamics
Political instability in Italy and its possible consequences for the European economy forces investors to buy safe assets. Against this background, not only the euro is falling, but also the quotations of commodity currencies, as well as commodity prices, are falling. Against this negative background, the Canadian dollar fell against the US dollar, reaching a 2-month low at 1.3045 on Tuesday.
The US dollar, which also enjoys the status of a safe asset in this situation, continued to grow on Tuesday. The dollar index DXY, reflecting its value against the other 6 major currencies, reached its new annual high of 94.98 on Tuesday.
Nevertheless, on Wednesday the US dollar took a pause and declined from the opening of the trading day. Futures on DXY traded at the beginning of the European session on Wednesday near the mark of 94.35.
Today the publication of important macroeconomic data is expected.
In particular, at 12:15 (GMT) ADP data on the number of jobs in the private sector of the US for May will come out. If they are strong, then the positive trend of the dollar will resume. As a result, the dollar index DXY could rise to 96, according to many economists. It is expected that the number of employed in the private sector of the US rose in May by 190,000 (after an increase of +204,000 in April). Strong ADP data on employment in the private sector will support the upward momentum of the dollar.
At 12:30 (GMT), the Bureau of Economic Analysis of the US Department of Commerce will publish data on US GDP for the first quarter (second estimate). Data on GDP are one of the key (along with data on the labor market and inflation) for the Fed in terms of its monetary policy. In the previous quarter, GDP growth was + 2.5%. The forecast for the 1st quarter of this year is 2.3% (2.3% on the preliminary release). The dollar will decrease only if the data prove to be much worse than the forecast.
Despite the decline observed today, the dollar continues to dominate the foreign exchange market.
At 14:00 (GMT) the decision of the Bank of Canada on the interest rate will be published. It is expected that the Bank of Canada will not change the current monetary policy. The rate will remain at the current level of 1.25%.
As Bank of Canada Deputy Governor Lawrence Schembri said earlier this month, the Bank of Canada "has to hedge itself because of the uncertainty surrounding NAFTA negotiations".
The strengthening US dollar and the uncertainty associated with the prolongation or amendment of the terms of the NAFTA agreement support the USD / CAD pair.
Nevertheless, investors will carefully study the text of the accompanying statement of the Bank of Canada. Rigid rhetoric of the accompanying statement and any hint of a rate hike in the coming months could cause a surge in volatility in the foreign exchange market and lead to the strengthening of the Canadian dollar.
If the rhetoric of the Bank of Canada's statement is soft, it will cause further weakening of the Canadian dollar.*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics

WTI: decrease of reserves in US oil storage facilities is expected
31/05/2018
Current dynamics
As the American Petroleum Institute (API) said on Wednesday evening, US oil inventories rose by 1 million barrels last week. Gasoline stocks fell by 1.7 million barrels, while distillate stocks increased by 1.5 million barrels.
This is negative information for oil quotes, which are again declining after corrective growth the day before.
At the beginning of the European trading session on Thursday, the price of WTI crude oil fell below the psychological level of 68.00 dollars per barrel.
After reaching an annual maximum near the $ 73.00 per barrel level last week, prices fell by 10% over the next 5 trading days, coming close to $ 66.00 per barrel.
The fall in oil prices was triggered by expectations that OPEC might increase oil production in June.
Last Friday, Saudi Arabia and Russia announced plans to soften the terms of the OPEC + agreement and increase oil production. The OPEC + agreement on production reduction came into force in January 2017, and since then oil prices have risen by about 35%. The agreement expires at the end of 2018.
Earlier in May, Brent oil prices broke through the level of $ 80 per barrel, and this happened for the first time since 2014.
Now, due to an increase in production of 1 million barrels per day, prices may fall by about $ 15 per barrel.
On Friday, a weekly report from the American oilfield service company Baker Hughes was released, according to which the number of active oil drilling rigs in the US increased again and currently stands at 859 units (against 844 in the week before last). The growth of this indicator is another negative factor for the oil market and for oil prices.
On Thursday, oil market participants are waiting for the publication of weekly data from the US Department of Energy, which will be released at 14:30 (GMT). It is expected that oil and oil products stocks fell by 1.2 million barrels last week. If the data is confirmed, then it will support oil prices.*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics

Current dynamics
The volume of consumer lending in the UK in April rose sharply after a period of weakness in March.
The data published on Thursday pointed to the strongest growth in unsecured consumer lending for almost 18 months. Unsecured consumer lending jumped to 1.8 billion pounds in April after falling to 400 million British pounds in March.
This signal can affect the Bank of England and convince in the need to raise the key interest rate in the coming months.
On Friday, the pound gained additional support after the index of supply managers (PMI) for the UK manufacturing sector, which in May exceeded the forecast of 53.5, to 54.4, was published at the beginning of the European session.
The production growth accelerated to the highest level in the last year of the current year against the backdrop of the strongest growth in inventories over the entire 26-year history of observations and a sharp reduction in outstanding orders.
After the publication of the data, the pound strengthened, and the GBP / USD pair increased by 30 points relative to the opening price of today.
Meanwhile, the US dollar is trading almost unchanged, while investors are preparing to the publishing of important economic report at the end of the week.
The dollar index DXY, reflecting its value against the other 6 major currencies, today declined slightly at the beginning of the European session, to 93.95, after it reached its next annual maximum of 94.98 on Tuesday.
At 12:30 (GMT), the US Department of Labor will report on the most important indicators of the labor market in the US in May (Average hourly wage / Number of new jobs created outside the agricultural sector / Unemployment rate). Forecast: + 0.2% (against + 0.1% in April) / 188 000 (against 164 000 in April) / 3.9% (against 3.9% in April), respectively.
In general, the indicators can be called strong. If they coincide with the forecast or come out better, then this will have a positive effect on the USD.
Strong data will strengthen the likelihood of four Fed rate increases this year. In this case, the investment attractiveness of the dollar will grow.
According to some leaders of the Fed, "it is advisable to continue to tighten monetary and credit policy in order to avoid increasing risks for macroeconomic stability".
Thus, the different focus of the monetary policy of central banks in the UK and the US, as well as the uncertainty about Brexit, will further reduce the GBP / USD.
However, if the data prove to be worse than the forecast or market participants find the report on the labor market weak, then the dollar will inevitably fall.
In any case, it is often difficult to predict the market reaction to the publication of indicators. Often, a strong move to the one side should be followed by an equally strong rollback to the other side, since the data published earlier is often revised.
Probably the most successful trading position today will be to stay out of the market, at least, in this period of time.*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics

Current dynamics
According to data released by the US Department of Labor on Friday, the number of jobs outside agriculture increased by 223,000 in May (forecast was +188,000), while unemployment fell to 3.8 percent, the lowest level since 1969.
The number of jobs in the US has been growing for 92 months in a row, which is the longest such period in the history of such statistics.
The growth in demand for labor should positively affect wages, which are still growing at a moderate pace. The average hourly earnings in the US in May grew by 2.7% (in annual terms).
The US dollar recovered with support for strong employment data for May, which made it more likely to accelerate the rate of interest rate increase in the coming months.
The probability that the Fed will raise the interest rate by 0.25% to 2.0% at a meeting to be held June 12-13 is almost 100%, according to the CME Group.
However, more interest for investors will be represented by the text of the Fed's accompanying statement about the prospects of monetary policy and the probability of more accelerated rates of its tightening. 3 planned Fed rate increases this year are already taken into account in the quotes of the US dollar.
If the Fed signals about a high probability of 4 rate increases this year, then the dollar's growth will resume.
Meanwhile, there is a decline in the US dollar after its growth on Friday against the backdrop of strong data from the US labor market.
The Trump administration does not show signs of concern about the possible start of a trade war. "When the deficit of foreign trade is almost 800 billion dollars a year, one can not afford to lose a trade war", Trump wrote on his twitter page on Saturday. "The USA has been ripped off by other countries for years, it's time to take on the mind," he added.
Meanwhile, the Australian dollar received support in the morning from the publication of positive macro statistics, according to which, retail sales in Australia in April rose by 0.4% (forecast was + 0.2%), companies' profit in Australia in the 1st quarter increased to + 5.9% (the forecast was + 3.0% and + 2.8% in the previous quarter).
Nevertheless, key indicators such as the Australian labor market and consumer incomes remain weak.
So, the unemployment rate in Australia is 5.6% (in March this level was 5.5%), and the growth rate of salaries in Australia remain near record lows. Thus, the growth of wages in Australia in the first quarter of 2018 amounted to + 2.1% (in annual terms). The Reserve Bank of Australia pays much attention to this indicator when deciding on the interest rate.
Low wage growth rates may prompt the Reserve Bank of Australia to not change interest rates for a longer period of time.
On Tuesday (01:30 GMT), the RBA takes a decision on the rate, which since mid-2016 is at a record low level of 1.5%. Deputy Governor of the RBA Debell said that interest rates will not be raised until consumers' incomes rise.
Economists believe that the first increase will take place only in 2019. However, interest rates may remain unchanged for an even longer time, given the weak wage growth and the slowdown in the Australian economy.
It is likely that on Tuesday the rate will remain at the same level of 1.5%.
"The Board does not see any weighty arguments in favor of adjusting the key interest rate in the short term," - said in one of the latest statements of the RBA.*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics